Market: KOSPI (015760)
Brokerage : Hana Securities
Analyst : Jae-seon Yoo
Investment Rating : BUY (Upgraded)
Target Price : KRW 45,000 (Maintained)
Core Momentum : As downward revisions to earnings estimates conclude on stabilizing commodity prices, massive AI data center-driven power demand and a policy pivot toward baseload nuclear expansion in the 12th Basic Plan support long-term valuation recovery.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Upgraded from Neutral), Target Price KRW 45,000 (Maintained, 12M Horizon).
- Valuation Multiples: 2026F P/E 5.44x (Consensus 5.4x), P/B 0.42x (Consensus 0.4x).
- Financial Estimates:
- 2025A: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.49 Trillion, Pre-tax Profit KRW 11.59 Trillion, Net Profit KRW 8.54 Trillion, EPS KRW 13,311, ROE 19.40%, DPS KRW 1,542.
- 2026F: Revenue KRW 97.55 Trillion, Operating Profit KRW 7.95 Trillion (-41.0% YoY), Pre-tax Profit KRW 5.46 Trillion, Net Profit KRW 4.04 Trillion (-52.7% YoY), EPS KRW 6,297, ROE 8.09%, DPS KRW 230.
- 2027F: Revenue KRW 97.07 Trillion, Operating Profit KRW 9.92 Trillion (+24.7% YoY), Pre-tax Profit KRW 7.47 Trillion, Net Profit KRW 5.60 Trillion (+38.6% YoY), EPS KRW 8,727, ROE 10.27%, DPS KRW 250.
🚀 2. [Market Opportunities & Business Outlook]
- 2Q26 Earnings Preview:
- Revenue expected at KRW 22.0 Trillion (+0.3% YoY) and Operating Profit at KRW 1.8 Trillion (-14.4% YoY), matching market consensus.
- Electricity sales revenue faces negative growth due to weak industrial demand and lower tariffs, but overall top-line is buffered by growth in overseas business and other revenue streams.
- Fuel costs estimated at KRW 4.8 Trillion (+13.3% YoY) driven by the expiration of coal consumption tax discounts and higher import unit prices.
- Power purchase costs projected to decrease to KRW 8.2 Trillion (-4.9% YoY) as a 3.7% YoY drop in quarterly average SMP offsets the lower share of baseload generation.
- Utilization rates by power source estimated at 41.0% (+3.2%p YoY) for coal and 73.6% (-8.8%p YoY) for nuclear.
- Cost Trends & Earnings Trajectory:
- Despite ongoing FX pressures, raw material price indicators have peaked and stabilized, signaling the conclusion of downward earnings revisions.
- Quarterly cost burdens are projected to peak in 3Q26 and gradually subside thereafter.
- AI Data Center Power Demand & Policy Shifts:
- The government’s AI Data Center roadmap across 3 mega-projects (Phase 1: 8.4GW by 2029, Phase 2: 10GW by 2035) totals 18.4GW of capacity, requiring ~113TWh of power (assuming 6.1TWh per 1GW).
- This represents an increase of more than 20% over South Korea’s total 2025 electricity consumption (550TWh), excluding additional loads from semiconductor and physical AI investments.
- Government discourse indicates significant investments in baseload capacity, notably nuclear energy, to meet surging demand. The upcoming 12th Basic Plan for Electricity Supply and Demand is expected to serve as a catalyst for multi-year valuation re-rating.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as an energy utility concluding its negative earnings revision cycle as input costs stabilize, transitioning into a multi-year valuation re-rating phase supported by surging AI data center electricity demand and a decisive policy pivot toward nuclear baseload expansion. The core perspective emphasizes the long-term structural restoration of fundamental earning power through baseload additions in the upcoming 12th Basic Plan, rather than transient quarterly cost fluctuations.
To evaluate whether this investment thesis holds true, key monitoring variables include the easing of fuel and power purchase costs following the 3Q cost peak, actual industrial power demand trends stemming from AI data center buildouts, and the finalized nuclear capacity targets outlined in the 12th Basic Plan for Electricity Supply and Demand. These factors can be tracked through KEPCO’s quarterly financial releases, KPX power market data, and official MOTIE energy policy publications.
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Source: This content has been structured and newly written based on officially disclosed financial facts and data from brokerage reports.
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